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Amazon’s test of Product Listing Ads is bad news for other retailers

December 30, 2016 03:49 PM

In what could be a big win for Google, Amazon.com Inc. has—at least on a trial basis—started buying Google Product Listing Ads (PLAs), putting it in the mix of Google Shopping advertisers in the United States—likely for the first time.

According to marketing firm Merkle Inc., Amazon No. 1 in the Internet Retailer 2016 Top 500 Guide, started running the ads around Dec. 20.

“We have seen Amazon running PLAs for a range of product categories including toys and office supplies, but its presence has been strongest in the home goods and furnishings category,” says Mark Ballard, senior director, research at Merkle, who also wrote about the Amazon ads in a recent blog post. “We are not seeing them show for consumer electronics or apparel yet.”

PLAs are ads that present product images, prices and business names to users searching on Google. Advertisers pay when consumers click through to visit their websites or view their local inventories directly on Google.

Amazon officials could not be reached for comment.

The impact of Amazon’s move into product listing ads depends on what Amazon does next, Ballard says.

“If Amazon abandons PLAs after a couple of weeks of testing, it might be a small moral victory for Google that Amazon finally tested PLAs at all, but it won’t be terribly meaningful to Google’s bottom line,” Ballard says.

However, if Amazon decides to fully invest in PLAs for the long term at similar return-on-investment targets as other e-commerce advertisers, it will be a big win for Google, Ballard says. Not only would Google reap direct ad dollars from Amazon, Ballard says, but Amazon’s participation could drive up costs for other advertisers, who would likely have to bid more in order to maintain the same amount of traffic from Google Shopping.

In addition, Ballard says, the inclusion of Amazon would make Google Shopping, the pages consumers see when they click the Shopping tab above a Google search results page, a more complete experience for consumers, which should drive up total visits to Google Shopping.

“It is a very big deal,” Antonucci says. Like Ballard, Antonucci says Amazon’s foray into PLAs could raise costs for other e-retailers.

"Amazon's entrance into Google Shopping will undoubtedly have a major impact on online retailers. As a paid traffic source, Google Shopping has been the most effective ad unit for our clients and oftentimes their biggest source of new customers,” Antonucci says.

Because Amazon can afford to think long term, Antonucci says, it is likely willing to spend more to acquire new customers than smaller rivals, making bidding for Google Shopping ads more competitive. To compete, he says, e-retailers will have to think strategically.

“With Google Shopping ad auctions becoming more competitive with the addition of such a major player, it will be even more important for small e-commerce sites to understand what search terms, products and devices their PLA campaigns are spending on,” Antonucci says.

Based on monitoring from both Merkle and Exclusive Concepts, Amazon product listing ads have so far been only for products that are shipped and sold directly by Amazon—not for items sold by marketplace sellers. Data from Exclusive Concepts, like that from Merkle, shows Amazon’s spending for Google PLA ads has been strongest in the home goods and furnishings category, Antonucci says.

Antonucci says Amazon units such as Zappos.com and Amazon’s operation in India have used Google PLAs, but the online retailer has not used Google PLAs domestically.